Financial and commodity markets analytics

US dollar rally not finished

Published on 31.01.2019 20:05

he US dollar failed to capitalize on a strong Jobs report on Friday as the market was still pondering the latest US Federal Reserve policy statement where some analysts now predict that the Fed may be done with their latest rate hiking cycle. The latest Non Farm payrolls figure hit the market well above expectations which was Ironic considering the Feds dovish statement about the US economy just a few days earlier. The wage growth figures were below analysts’ expectations which may have kept the lid on any significant gains for the greenback “We had a knee-jerk rise in the dollar based on the strong gain in payrolls as well as the overall solid report,” said Eric Viloria, FX strategist at Credit Agricole. “But the miss in wages probably reinforces this patient approach by the Fed and that has restrained the dollar,” he added Some analysts are now starting to predict that the Fed may have to cut interest rates this year in order to keep things going but some are saying that the timing for any rate cuts is a little early and contrary to many, believe the central bank still has some way to go this year with their rate hiking cycle. This factor should keep the US dollar well supported as the year unfolds. "The market is now flirting with the possibility of an interest rate cut by the Fed during 2019, apparently confident that the tightening cycle is over. It is tempting to look for an extension weaker, but we have our doubts that a bearish USD trade will remain the best tactic for the coming month." says Daragh Maher, head of U.S. FX strategy at HSBC. "Simply put, if the reassurances offered in Powell’s rhetoric stabilize markets and the economic data remains robust, then the market looks rather underpriced for the risk the Fed may have a hike or two more to deliver. The risks are skewed to USD upside," he added.

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